Stability of rates expected as maturities offset auctions

There are high expectations that money market rates will record moderate stability as maturing treasury bills worth N208.283 billion  more than offset treasury bill auctions worth N177 billion.

Hence, dealers at Cowry Assets Management Limited said they expect “financial system liquidity ease and resultant stability in interbank rates.”

The Central Bank of Nigeria (CBN) is planning to raise N177 billion ($562 million) of short-dated treasury bills at an auction on July 5, the regulator said on Thursday.

The bank said in a public notice it planned to sell N35 billion of three-month debt, N22 billion of six-month bills and N120 billion of one-year notes at the auction, using a Dutch auction system.

Meanwhile, the central bank of Nigeria on Friday sold N31.94 billion  ($104.76 million) in treasury bills in a bid to tighten liquidity in the money market while overnight lending rates fell.

Traders said the bank sold N31.52 billion of 349-day Treasury bill at 18.59 per cent and N440 million of 160-day Treasury bill at N17.98 per cent at an auction on Friday.

Cost of borrowing among commercial lenders however dropped to around five percent on the interbank market from around 8.5 per cent week before last.

Traders said cash balance in commercial lenders’ accounts with the central bank stood at N320.35 billion on Friday, boosted by the repayment of around N287.39 billion in matured treasury bills on Thursday.

“Interbank rate is at low level because the central bank sold fewer dollars this week (on the currency market),” one currency trader said.

Traders expect rates to remain flat this week unless the central bank decides to take advantage of the low rates to mop-up excess liquidity from the banking system.